I cloned the built-in "OCR Pages" tool to a custom one named "OCR (PDF) Auto Incl sub-folders". Under "Choose input files", I set "Select folder". But, since I'd like to pass the folder name via the command line, I didn't pick Browse to select a folder. I also set "Look in subfolders".

Thank you for reporting this, It seems that you have found two issue at once.

The dev team is looking into why this is not working as intended. By default it should properly take the settings you have chosen, including the "look in subfolders" function.
The other issue is that, we missed documenting the parameter to disable this function, I have notified our writer so that the manual can be updated to reflect the missing option soon.

For reference, when working correctly, you would use a similar line to the following only to DISABLE the "look in subfolders" functionality from the command line: